1. Alumni Magazine IESE32 OCTOBER-DECEMBER 2015 / No. 139
PRINCIPLES FOR GOOD
CORPORATE GOVERNANCE
I D E A S
BUSINESS ETHICS • BOARD OF DIRECTORS •
CODE OF GOOD GOVERNANCE
O
ur society has be-
come a culture of
blame.Forobvious
reasons, we tend
to seek a “culprit”
for every mishap,
and companies
are no different;
undesiredoutcomesinvariablyresult
infinger-pointing.
Not so long ago, when an invest-
mentfailed,investorswouldassume
the responsibility. Over time, we
came to blame the company’s audi-
tors for not warning us about what
might happen, even when this isn’t
their job. More recently, and in the
absence of anyone else to blame,
we have begun pointing a finger at
the board of directors. Now, the
first thing we hear is, “Who took the
money?” as if business in itself did
notinvolveanyrisk.
Codes of good corporate gover-
nance have been developed, both
in Spain and in other countries, to
reflect the duties and obligations of
boardmembers.AccordingtoSpain’s
Unified Code of Good Governance for
ListedCompanies(latestedition,Feb-
ruary2015),thegoalofthesecodesis
“to ensure the proper functioning of
theorgansofgovernanceandadmin-
istrationofSpanishcompaniesinor-
dertoleadthemtothehighestlevels
of competitiveness; generate trust
and transparency for shareholders
and investors […]; improve internal
regulation and corporate responsi-
bility […]; and ensure the adequate
separation of functions, duties and
responsibilities…”
I couldn’t agree more with the
general objective: leading Spanish
(or other) companies to the highest
levels of competitiveness. My prob-
lem with the rest of the paragraph is
that it gives the impression that this
can be achieved with transparency,
trustandtheseparationoffunctions.
Success, value and competitiveness
are achieved through good manage-
ment,andthemissionoftheboardis
tocontributetopropermanagement.
Transparencyachieves…transparen-
cy. But transparency doesn’t neces-
sarilyimplygoodmanagement.
Good management involves hav-
ing good business ideas and creating
value with them. It means deploying
theseideaseffectivelyandefficiently,
thusfulfillingobligationstoallstake-
holders.
The problem with codes of good
governanceisthatsometimeswetake
compliancewithacodeforgoodgov-
ernance,andtheyarenotnecessarily
thesame.Beyondthecodes,thereare
other principles that are worth re-
membering,eveniftheymaybeobvi-
ous:theindependenceandhonestyof
boardmembers.
Itisnoteasytodefinewhatmakes
a board member independent. It’s
true that if compensation for board
membership is a significant part of
the member’s income, he or she will
tend not to be independent. Rather,
the member will tend to align him or
herself with whomever has the most
powerinappointingboardmembers.
Likewise, a member who is in the
“network” of board members will
also have little independence. Fac-
torssuchasthesecanhelp“measure”
amember’sdegreeofindependence,
but they remain mere approxima-
tions. What makes a board member
really independent is honesty. We
set “objective” standards to be able
to tell if we’re honest or not, but we
forgetthattherulesareonlyameans
toanend.Theyarenotendsinthem-
selves.
THEBOARDANDI
CARLOSGARCÍAPONT
Professor
of Marketing,
IESE
When something goes
wrong in a company, we
tend to point the finger
at the board of directors.
Beyond codes of good
governance, what can
help boards to function
better is the honesty of its
members.

2. Alumni Magazine IESE 33OCTOBER-DECEMBER 2015 / No. 139
Being honest
Learning
Clear reasoning
Handing over the
reins
Having one’s
own opinions
Working
together
Listening
Respecting
others
1
2
3
5
4
6
7
8

3. Alumni Magazine IESE34 OCTOBER-DECEMBER 2015 / No. 139
I D E A S
useful rule of thumb is to begin the
response with a clarifying question;
thiswayyoucanbesurethatyouhave
understoodthetruemeaningofacol-
league’sremark.
4 A change of opinion is not a
weakness. No one arrives at a board
meetinginpossessionoftheabsolute
truth. The goal is to work together to
decide what is best for the commu-
nity. This means exchanging ideas
andhavingpermissiontochangeour
minds. Changing an opinion doesn’t
meanlosingface.Othermembersalso
have valid opinions that don’t neces-
sarilycoincidewiththefirstideasthey
expressed. It’s not about being right,
butratheraboutexpressingideasand
developingthemtogether.
5 Don’t be fickle. While flexibility
is a virtue, “flip-flopping” in order to
keep one’s views aligned with those
of the person in power is not. Nor is
suddenly reversing a position so that
itcoincideswiththewinningidea.Be-
ing independent means having one’s
ownopinions.
6You don’t have to have an opin-
ion about everything. There is no
needtodominatethemeeting.There
is no reason to pontificate about all
the agenda items. Other members
might have better-formed opinions;
it’s a good idea to hand the reins to
whomeverisbestsuitedtotakethem.
7Learn. If a person is serving on a
board of directors, one would hope
that it’s because he or she is quali-
fied for the position . Therefore, the
views of a board member are always
relevant.It’simportanttolearnfrom
colleaguesontheboard,discoverhow
they think, and maintain that curios-
ity that keeps our minds open and,
aboveall,allowsustolisten.
8Respect other board members.
If you don’t, you won’t realize when
they’re making valuable contribu-
tions.
No, my intention wasn’t to reach
the magic ten; eight is enough. Nor
wasIsettingouttosolvethiscomplex
problem in a single article. I simply
wanted to reflect on how we can use
our individual professionalism and
responsibility to improve the boards
weserveon.
A BOARD
MEMBER NEEDS
TO ADVANCE
THE INTERESTS
OF ALL
STAKEHOLDERS,
REGARDLESS OF
WHO PROPOSED
HIS OR HER
MEMBERSHIP
ON THE BOARD.
THAT’S WHY WE
NEED HONEST
PEOPLE.
What we really want are honest
board members. That is, people who
are faithful to the responsibility that
our system charges them with. This
responsibility consists of protecting
theinterestsofsocietyinacompany;
society is represented by sharehold-
ers,employees,customers,suppliers
and the community at large. A board
member needs to advance the inter-
ests of all stakeholders, regardless of
whoproposedhisorhermembership
ontheboard.Andthat’swhyweneed
honestpeople.
A board needs competent people
withvalues.Peoplewithabroadview
oftheworld,whojoinaboardtowork
hard and not merely to waste every-
body’s time. And, of course, people
without conflicts of interest. It helps
if they know something about the in-
dustryandthecompany,buttheycan
acquirethisknowledgeovertime.
With all this in mind, I would like
to propose some standards of per-
sonalconductthatboardsofdirectors
shouldkeepinmind:
1Acknowledge your limitations.
Being honest includes admitting our
ignorance. A board member isn’t
necessarily qualified to give an opin-
iononeverysubject.Ontheboardof
directors, we need a range of voices,
representing different knowledge
and skill sets. Admitting that we
aren’t qualified to give an opinion is
avalidoption.
2 Share anecdotes only when es-
sential. All too often we hear “When
I…”asanopening,andthissometimes
hidesinsecurityinexpressinganopin-
ion. As the saying goes, comparisons
are odious, and two sets of circum-
stances are never identical. That’s
why clear reasoning is preferable to
comparisons – although sometimes
we can use comparisons effectively
tohelpgetourpointacross.
3Listen. Board meetings are often
plagued with interruptions and a
lack of attention. Every member has
to be able to express an opinion and
be heard by the others. But listening
doesn’t always imply understanding
what has been said. We are all aware
of how difficult it is to explain our
thoughts on complex situations. A

4. PUBLICIDAD
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